Monday, October 07, 2013

The latest battle over abuse of eminent domain

Very early on a Wednesday morning in September, the city council of Richmond, Calif., did something that no American city had yet managed: It voted for a plan to wrest underwater mortgages from the hands of Wall Street, depriving investors of tens
of millions of dollars in order to save borrowers from foreclosure...

...In short, here's how it would work: Richmond condemns mortgages on homes that are now worth far less than what the borrower owes. The note holders -- investors such as pension funds and mutual funds -- are forced to settle for the current fair market value. The city pays for this with cash from a new set of investors, who now own the mortgage. The new price is set by the current market, and the homeowner settles into a more manageable loan.

It's that smashing of the bond between lender and debtor that animates investors. They've acted aggressively to stop it, lobbying the mayor and council members directly. Wells Fargo and Deutsche Bank, on behalf of scores of investment funds, sued to stop the plan. The securities industry points out that the plan would also hurt pensioners who own pieces of Richmond's mortgages. Indeed, last week, California Public Employees' Retirement System -- the safety net for some Richmond workers -- expressed concerns.
Read the rest here.

1 comment:

Anonymous said...

The idea that this is "abuse" of eminent domain appears to presuppose that the law was operational in the first place vis a vis the great mortgage scam.